Great news!

Average life expectancy across the UK as a whole has risen from 75.9 years in 1990 to a current average of 81.3 years.

Those are fantastic numbers if you are fit and healthy but what if you have to go into care? What if you have to spend a long time in care? How will it be paid for?

Firstly, let’s look at a very typical situation that a number of older couples may find themselves in.

Mary and Peter are in their early 70s, married and own a house on a Joint Tenancy basis. Joint Tenancy is the most common way that a married couple will own a house and means that they own 100% of the house together.

When Peter’s health deteriorates, he moves to a care home while Mary, who is in good health, remains in the home they own. At this point, the house cannot be seen as an asset to help pay for Peter’s care home fees because Mary is still an occupant. When Peter passes away in the care home, Mary is the sole beneficiary of his will and now owns 100% of the house.

However, when Mary has to enter the care home system a few years later, and the house becomes empty, it is immediately seen as an asset by the local authority and a sale can be forced in order to pay for Mary’s care home fees.

Because the couple didn’t know about putting the house in a discretionary or family trust, the wealth that they accumulated during their lifetimes has gone towards paying for care home fees and the opportunity to pass that wealth on to their children and grandchildren gone.

Care home fees in the north-west are an average of £471 per week for a retirement home, rising to £678 per week for a care home with nursing.

The average equity within a house is £85,000 which means that all of your hard work could be consumed by care home fees in under 3 years.

Now let’s look at what could happen if Peter and Mary’s house had been put in a discretionary or family trust.

Firstly, they would need to be Tenants in Common rather than Joint Tenants. This is arranged using a Deed of Severance and means that each person owns a specific percentage of the house. Often this split is 50/50 but it does not have to be and will depend on your own circumstances. The key to our method is that a sale cannot be forced by the local authority because it is impossible to sell half a house.

In this example, using the very same typical circumstances as above, Peter enters the care home and after some time passes away. However, in this instance, his half of the house passes into a trust.

The trustees allow Mary to live in the house until she needs to go into care.

When Mary enters the care system, the house cannot be sold to pay for her care fees because she only owns half a house. As it is impossible to sell half a house, this asset cannot be used to pay for her care home fees.

When Mary passes away, her percentage of the house now goes into the trust and the trustees can then decide what to do with it.

And the cost?

The cost of setting up the trust arrangement will be £450.00. Most often, but not always, the Deed of Severance will also be required at a cost of £125.00.

This arrangement can, therefore, be completed for £690.00 (including vat)

Compared to the thousands which you could lose to care home fees.

Because every couple has slightly different circumstances ranging from how many children they have to the amount of equity in the house, it’s important that you talk with an expert in order to arrange your trust in the most beneficial way possible in order to pass your wealth on to your family and not the government.